Real estate owner Kimco to benefit from Albertsons' acquisition of Rite Aid

Key Points
  • Kimco has a roughly 9.7 percent stake in Albertsons.
  • The real estate investment trust is expected to unlock additional liquidity as the supermarket chain completes its acquisition of Rite Aid.
  • A combined Albertsons and Rite Aid would have a value of roughly $24 billion, including debt.
An Albertsons store in Laguna Niguel, California
Scott Mlyn | CNBC

Real estate investment trust Kimco Realty is poised to be one beneficiary of Albertsons acquiring Rite Aid, creating another U.S. grocery-pharmaceutical behemoth fending off Amazon and Walmart.

Kimco has a roughly 9.7 percent stake in the Boise, Idaho-based grocer, which could now be valued at as much as $685 million, according to BTIG Research. Kimco's investment in the chain was recently valued before the Rite Aid deal was announced at around $140 million, for comparison.

The retail REIT's shares were up around 2 percent Tuesday afternoon on the news.

"Beyond the strong returns we have already generated, we will have greater flexibility and liquidity with our investment via the public markets," Kimco CEO Conor Flynn said in a statement. The deal between Albertsons and Rite Aid demonstrates "what we believe is the future of retail," he added.

A combined Albertsons and Rite Aid would have a value of roughly $24 billion, including debt. The deal is expected to close later this summer, the companies said Tuesday, when Kimco will also have a better idea of the market value of its stake in Albertsons.

In turn, the REIT and shopping center owner is expected to use the liquidity boost to pay down debt or fund its redevelopment pipeline. On a recent conference call with analysts and investors, Kimco's management said the company was also focused on disposing of assets in the coming year, moving out of less-profitable markets.

"Most investors have probably written off this [Albertsons] investment but even the repayment of original principal would help KIM in its deleveraging efforts," Boenning & Scattergood analyst Floris van Dijkum told CNBC.

Kimco shares have fallen around 15 percent already this year. The company has been hit as other retail landlords, namely mall owners, are under fire after news of store closures and tenants going bankrupt.

Some of Kimco's top tenants today include Florida-based grocer Publix, TJ Maxx owner TJX, Home Depot and Kohl's.

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